LEGAL VIEWPOINT: The Board & CEO to depart by Dr AbdelGadir Warsama Ghalib, Principal Legal Counsel, Bahrain


(Good governance and best practices)

Dr AbdelGadir WarsamaGhalib, Principal Legal Counsel, Bahrain
Asia 728x90

Always there is a special trustful fiduciary relationship between the Board and the CEO. This is very essential and highly needed for work purposes and smooth performance of the duties of all. However, acute problems are possible and divorce situations may arise for different reasons. Herein, wise wisdom and good governance is required and there is huge burden on the Board to conduct full fair, independent investigation and to take an appropriate fair action based on the results. In case evidence shows the CEO must leave or to be terminated, all eyes turn to the Board to judge how just and equitable they will act away from any mistake or mal-judgment.   

It goes without saying that, each Board must be experienced, and dedicated to good governance and best practices. This is part of the parcel and should be the over-all coat of the Board all through. The position of the CEO is deemed top executive, leader, corporate strategist and very sensitive, however, we clearly need to mention that firing a CEO could be easier than firing a junior employee wherein the terms of the employment laws and HR regulations will be strictly applicable starting from the notice to be given before lawful dismissal. It could be easier for a Board to fire a CEO if he has engaged in any form of bad personal behavior, misconduct, fraud, theft, corporate mishandling, grand malfeasance, steep drops in share price, lack of consumer confidence …etc. All these cases will make it easy for the Board to act. No black or white blindness there, as corporate reputational, operational and legal risks now dictate that the organization cannot allow someone who has acted in such a manner to remain, otherwise, the organization will not remain or be paralyzed.

The task becomes more challenging, if the issue over which the CEO will be fired, is not direct or say is ambiguous. As in instances where the strategy just seems not working well, or Board members has turned against the CEO, or mishandling a point, failure of a project form unclear reasons…etc. These situations can really challenge the will, views and the shared vision of the Board.

How can Boards hold themselves together, from any possible division, and begin to act from best practice perspective rather than personal ideas and believes. Whenever, an issue regarding the CEO arises, we need to make sure every Board member puts the strength and viability of the company above personal interests. This is a must. Nowadays, everyone knows that, the world is moving away from cronyism on Boards, and any Board must do the same. Otherwise, corporate or best practices will not exist or prevail.

The Board under the direct supervision of the Chairman, shall take as much time as is needed to complete deliberations and discuss them appropriately in complete confidence. In all cases, unless there is urgent aspect to the decision, it would be better not to rush into action without a watertight look.

It would be prudent and more better to let the CEO go in a way that does not damage the reputation of the organization, the Board and, if possible, the CEO reputation. To achieve this there is a need to do the whole thing in dignity and professionalism. This will, undoubtedly, smooth the path to hire an appropriate suitable CEO who will look closely at how the Board handled firing his predecessor. The Board shall do it right and the consequences will be better.

This, comes from better corporate governance and best corporate practices. Our Boards and our corporations are advised to follow.

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